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Pensions News: Friday 26th February 2016

Pensions News (PN) was reading about pension liberation scams earlier today. You, the reader, will recall that pension liberation scams happen when someone (let's call him Del-Boy) tells you that he can "unlock" your pension. All you have to do is get your pension provider to transfer it to him and he will give it to you less his small commission. It was while reading about pension liberation scams that PN thought of Mr Brian Sewell (now deceased).

For those who do not know, Mr Sewell died on 19 September 2015. In life he was an art critic, television personality, writer and controversial commentator. Mr Sewell frequently courted controversy by criticising artists, celebrities and other public figures. According to Mr Clive Anderson, Mr Sewell was, when alive, a man "intent on keeping his Christmas card list nice and short".

PN frequently disagreed with views espoused by Mr Sewell but nonetheless enjoyed listening to him articulate them. The reason PN thought of Mr Sewell when reading about pension liberation scams was that, some years ago, when Mr Sewell was alive, he (I mean Mr Sewell) was asked to comment on the merits of building a memorial for a deceased member of the Royal family. Mr Sewell stated that he thought that that would be a terrible idea and that the money should instead be put to better use; building a school or hospital for instance. It was put to Mr Sewell that a memorial was what people wanted to see and so should be erected. Mr Sewell responded, infamously, by saying that this was all very well but that, in fact, people were stupid so it didn't really matter what they may or may not want.

PN does not, generally speaking, agree with Mr Sewell's view however there are times when he has been tempted into thinking that Mr Sewell might have had a point. Note that, he *might* have had a point.

Many people are being given a message which follows the following lines:

"Congratulations! Del-boy speaking. You have been chosen to have your pension unlocked by a specialist pension adviser. All you need to do is authorise your expensive insurance company to transfer your pension to that our specialists we will be able to unlock your pension and give you the cash!" The message does not then go on to say that the offer is too good to be true. It should.

The above message is a version of what became known, some years ago, as Nigerian scam number 1. Nigerian scam number 1 was later superseded by Nigerian scam number 2. These scams typically promised people six figure sums for doing nothing. All the person had to do was to disclose his or her bank details so that the Nigerian head of the department of something-or-other could then deposit a massive sum in that person's account for (usually) 24 hours. The idea was that the sum would then leave the person's account less a six figure sum to compensate the person for his/ her trouble. Any person willing to pass on his/ her details almost immediately became a victim whose bank account was promptly stripped of all money. It seems incredible now that people fell for this scam which, arguably, gives credence to Mr Sewell's view (set out above). On the other hand, human beings are not conditioned to regard every suggestion or offer made to them as a scam and, as one of PN's friends frequently observes, we all have a PhD in hindsight and so should not judge with its benefit.

PN's concerns for people (stupid or otherwise) were heightened by a recent ruling in the High Court. In Hughes -v- Royal London, the Court confirmed that a request made by a member to transfer the value of his pension benefits to another pension ought to have been acted on. In 2014, the member asked Royal London (an insurance company) to transfer the value of his benefits to another pension plan. As it was concerned about the status of the "receiving" scheme, Royal London refused. The member complained. The Pensions Ombudsman, hearing the original complaint, decided that Royal London had acted reasonably and dismissed the complaint however the High Court has overturned the Ombudsman's judgment.

Whilst the judgment is, arguably, a blow in favour of one's freedom to move one's pension money to where one pleases, it has been criticised as being a loud raspberry in the face of those pension schemes and their trustees who are trying to stem the flow of pension monies out of legitimate schemes in to schemes of more questionable parentage. The legal adviser to Royal London, a Mr Fairhead, certainly thought so and said so in the Financial Times. Put slightly differently, the judgment favours anyone wise enough and wealthy enough to read the small print, take proper advice and move his/ her money around however it invites the not-so-wise, not-so-rich person whom Brian Sewell so memorably criticised to walk in to trouble and stay there. Any person falling in to that second category would only realise he or she was in trouble when HM Revenue and Customs (otherwise known as the taxman) issued a penalty tax bill because Mr/ Ms Not-so-wise-or-rich had put his/ her money in an unauthorised place and taken an unauthorised payment.

There is an answer to this problem apparently. According to a pension publication (the one PN was reading when he thought of Mr Sewell in fact), the legal profession (or at least some of it) has suggested that HM Government could "resolve the pension liberation problem by ensuring that HMRC maintains a list of approved transferee schemes". Well yes, that would help in a way but; in another, more accurate way, it wouldn't. The success of a list depends very much on a person's inclination to read it, take notice of it and act on it.

Some time ago, PN tried to help an individual who had transferred the value of his pension benefits in an insured pension scheme to a more questionable scheme. The individual was understandably upset because, the following year, he was ordered by HMRC to pay £25,000 in tax because he had paid his pension to another scheme and had then received an "unauthorised" payment (this is a technical term employed by HMRC which means "highly dodgy") from that scheme. £25,000 represents 55% of the value of the payment made to him (let's call him Social Norm as a sort of tribute to a previous issue of PN) by the "dodgy" scheme. Social Norm was annoyed because the insurance company "should have known". Unfortunately for Norm, the insurance company had suggested at the time (it had done this in writing too) that Social Norm should take "independent financial advice" before making any decision. The insurance company had also sent Social Norm copies of guidance issued by the Pensions Regulator warning of the dangers of "pension liberation scams".

"Did you look at this?" asked PN when confronted by the papers. "No, of course not" said Social Norm. "Did you take financial advice? I see you ticked the form saying that you did" went on PN reading further. "Yeah" said Norm, "I said I did but the new pension scheme people said that it was all ok and they should know shouldn't they?". Social Norm has reached an agreement with HMRC that he will pay his tax as and when he can afford it. In other words, he has agreed to pay £10 per week. At that rate, Social Norm will have paid the tax on his unauthorised pension payment by the year 2223.

From deep underground, PN can hear Brian Sewell laughing his low-pitched, flutey laugh. It is all turning out just as he said.